- Recovery will be uneven across sectors, countries and income levels and could be bumpier than initially anticipated
In 2021, the global economy is projected to growby around 5% in market exchange rates- the fastest rate recorded in the 21st century - returning the global economy in aggregate, to pre-pandemic levels of output by the end of 2021 or early 2022.
The predictions published in PwC’s Global Economy Watch for 2021 - From the Great Lockdown to the Great Rebound - highlight key themes for 2021 linked to a wider reset for economies, skills and society.
Growth will return, but will be uneven and contingent on a successful and speedy deployment of vaccines and continued accommodative fiscal, monetary and financial conditions in the larger economies of the world. Another key theme will be how the push for recovery and growth could synchronize green infrastructure investment, creating a turning point in the fight against climate change.
Growth will return but will be uneven
Despite a projected expansion of 5% in market exchange rates this year, predictions caution that the next three-to-six months will continue to be challenging, particularly for countries in the Northern Hemispheregoing through the winter months, whichcould be forced into further localised or full economy-wide lockdowns.
Output in some advanced economies, for example, could contract in Q1, and growth overall is more likely to pick up in the second half of the year, when it is expected that large advanced economies will have vaccinated at least two thirds of their population.
A synchronised push for green infrastructure
The environment will be an important focus for 2021, as conditions are ripe in business and policy,for accelerating the transition to net zero. Significant investment and policy shifts related to the Paris Climate Agreement are expectedin the major trading blocs in 2021,including the US, China and the EU.
Green bonds, which are used to directly finance environmental projects, currently make up less than 5% of the global fixed income market. In 2021, total green bond issuance will increase by over 40% to top half a trillion US dollars for the first time. In addition, investor appetite for Environmental, Social and Governance (ESG) funds will continue to increase and could account for up to 57% of total European mutual funds by 2025.
Globally, the analysis points to electricity production from renewables continuing to gather momentum, with solar photovoltaic (PV) capacity likely to grow at rapid rates on the back of growing capacity in the EU, India and China. If current trends continue, solar PV capacity is on course to surpass natural gas in 2023 and coal in 2024 in the global electricity sector.